BAKU, Azerbaijan, May 20
By Leman Zeynalova – Trend:
Fitch Ratings expects Azerbaijan’s state oil company SOCAR’s EBITDA to rebound in 2021, on stronger international oil prices and increased regulated fuel prices since January 2021, Trend reports with reference to the rating agency.
“We expect funds from operations (FFO) net leverage to remain below 4.5x over 2021-2023, materially below our 6x downgrade sensitivity, and in line with the 'b+' SCP.
Most oil and gas projects in Azerbaijan operate under production-sharing agreements, in which SOCAR has a minority stake and where it also represents the state and is involved in marketing the latter's share of crude oil and gas (profit oil). In addition, SOCAR has stakes in some other major energy projects promoted by the state, such as the Southern Gas Corridor (SGC),” Fitch said in its latest forecasts.
The rating agency notes that taxes paid by SOCAR accounted for almost 10 percent of government revenue in 2019.
“The state guarantees 9 percent of SOCAR's debt and provides equity injections to cover cash deficits, when needed.
One of its key functions is production and sale of fuel at regulated prices to the domestic market, which are enough to cover the company's operating cash costs but are lower than international prices. Also, SOCAR employs more than 50,000 staff in Azerbaijan.
The state exercises significant control over SOCAR's profitability and balance sheet through regulation of domestic fuel prices, cash injections, government distributions and other measures,” the report reads.
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